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Investing Topics: Horizontal Drilling

Beyond The Big Four

The bullish case for US oil-field services hinges on accelerating drilling and completion activity helping to relieve the capacity overhang built up during the boom years, potentially setting the stage for a recovery in pricing.

Industry survivors with superior scale and balance sheets have an opportunity to take market share from smaller operators. Oil-field service companies have also slashed costs aggressively, providing earnings leverage to a recovery in volumes.

At the same time, investors must remember that many of these companies operate cyclical businesses and consider the extent to which current valuations have priced in any incremental upside in earnings.

Profitable Trend: Horizontal Drilling Picks up Steam in Permian Basin

The Bakken Shale, the Eagle Ford Shale and the Marcellus Shale may get all the press, as output from these plays continues to grow. But the Permian Basin–an area in west Texas that’s been in production for more than a century–appears poised for a breakout this year.

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